The Institutions-Finance-Growth Nexus

The Case Study of EU and European Transition Economies

Authors

  • Edib Smolo Effat University, Saudi Arabia & Economic and Social Research Institute, Bosnia and Herzegovina

Keywords:

financial development, institutional development, economic growth, developed countries, transition economies, European Union

Abstract

This paper empirically investigates the impact of finance and institutions on economic growth using a panel data analysis covering the 2002-2019 period and focusing on three country groups: European Union (EU) member countries, European transition economies, and the overall sample taking all countries together. In contrast to the prevailing view that suggests a positive impact of finance on growth, our findings indicate that finance either decreases growth or is insignificant without evidence of non-linearity. Another finding that comes as a surprise is that institutions play no role in growth either directly or indirectly via finance in all our samples. Our findings, however, support the claim that the finance-growth nexus depends on financial development proxies and the financial and institutional development levels within sample countries.

Author Biography

Edib Smolo, Effat University, Saudi Arabia & Economic and Social Research Institute, Bosnia and Herzegovina

Dr. Edib Smolo is an Assistant Professor and former Chair of the Finance Department and Director of the Master of Science in Finance program at Effat University, Jeddah, Saudi Arabia. Additionally, he is the Global Shari'ah Coordinator for a fintech startup based in Karachi, Pakistan. With experience in Islamic banking and finance, he has worked in a wide range of countries and for numerous multinational corporations and government agencies.

Prior to this position, he served as Assistant Professor and Vice-Dean for Scientific and Research Activities at the International University of Sarajevo's Faculty of Business and Administration. His previous positions included International Islamic Finance Manager at Tosan, Iran, and Islamic Finance Manager at Indra Technology Solutions Malaysia. During his time at International Islamic Liquidity Management Corporation (IILM), he developed the first short Islamic instrument with a global consensus that won the 2013 REDmoney global deal award. In a previous role, he worked as a researcher and coordinator for the Islamic Banking & Capital Markets unit at the International Shari'ah Research Academy (ISRA).

He holds a Ph.D. from the International Centre for Education in Islamic Finance (INCEIF), Malaysia’s Global University of Islamic Finance. His degrees include a Bachelor of Economics (Honours) and a Bachelor of Islamic Revealed Knowledge and Heritage (Honors), as well as a Master of Economics from International Islamic University Malaysia (IIUM), Malaysia. As part of a joint initiative formed by the New Bulgarian University and the Council of Europe, he also holds a Certificate for Professional Specialization in Political Management from the Bulgarian School of Politics.

In addition to writing and co-authoring several chapters in books, he also contributed to refereed journals on a variety of topics. He published “Introduction to Islamic Economics and Finance: Theory and Practice” in Bosnian in 2013. Aside from Islamic banking and finance, his interests include economic growth and development, financial development, market structure (bank concentration/competition), and EU and Western Balkan economic and financial issues. Additionally, he is a regular speaker, trainer, and consultant on various Islamic finance topics.

In addition to the EU and Western Balkans, he is open to collaboration with interested parties in other regions and for research and project collaboration.

Article 1, Vol. 1, Iss. 1

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Published

30-06-2024

How to Cite

Smolo, E. (2024). The Institutions-Finance-Growth Nexus: The Case Study of EU and European Transition Economies. Journal of Economics, Law, and Society, 1(1), 5–22. Retrieved from https://jels.esrein.org/index.php/journal/article/view/vol1iss1_article1

Issue

Vol. 1 No. 1 (2024): Journal of Economics, Law and Society

Section

Original Articles

Categories

License

Copyright (c) 2024 Edib Smolo

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.